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Mar. 10, 2015 - Updated 04:16 UTC

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Wagyu Cost Challenge

Jun. 21, 2016

The price of wagyu beef, prized for its tasty marbled flesh, has been soaring. But now, some breeding innovations are helping farmers and consumers alike.

Wagyu premium marbled beef is popular not only in Japan, but also around the world.

The price at one store in Japan has seen a 20 percent jump in the last 5 years.

"It's getting expensive these days," says one customer.

"I'd like to eat it, but I can't afford to," says another.

There's been some new activity at the breeding sites for wagyu cattle. The cows have been transported from the Kyushu region in southwestern Japan, which is the center of the wagyu beef industry, to the northern island of Hokkaido, famous for its dairy products.

The move is aimed at lowering prices.

Japanese wagyu beef is prized the world over for its rich flavor and highly marbled texture. Breeders work constantly to bring out new aspects of the meat.

But prices, which have risen by as much as 30 percent in the last 3 years, are hurting demand.

The reason? A shortage of wagyu calves.

Kagoshima Prefecture, in Kyushu, is the nation's top producer of wagyu. A calf cost about $6,200 on average last April.

But that's jumped to over $8,200. The record high is the result of a calf shortage.

"I can't bid any more. The prices are out of my reach," says one buyer at a market in Kagoshima.

These days, there aren't as many breeders. One farmer has been breeding calves for nearly 40 years. She had to stop farming due to poor health.

Most of the breeders are 70 or older, and their farms are small.

Age has been one factor that's prompted nearly 30 percent of wagyu farmers to stop working in the last 5 years. That's meant a drop in the number of calves on the market.

A major meat-processing firm called Itoham Foods is trying to find a solution.

The company has raised calves bought on the market and sold beef. Its mainstay business of selling wagyu is worth about $400 million. But now calves are scarce.

Three years ago, the company began breeding calves in Miyazaki Prefecture in Kyushu. The farm's been expanding, but it still can't produce enough calves to meet demand.

The issue is cost. Imported feed costs about $6.7 million a year. It's also expensive to dispose of manure.

"I want to expand the farm, but we just can't afford to," says Seiji Yamasaki, head of wagyu production at the company.

The company was looking for a solution. It focused on Hokkaido, about 1,600 kilometers away. The plan was to breed wagyu calves in the heart of Japan's dairy industry.

Wagyu cows were transported from Kyushu to Hokkaido.

In February, 50 head of cattle arrived there. The temperature falls to minus 20 degrees Celsius in winter. That's a drastic difference from Kyushu.

There was concern over the animals' health with the big move north.

"The most worrying thing is the temperature. There's a 33 degree difference," one farmer says.

The company took the risk because the area is the center of Japan's dairy industry.

Finding feed was a problem in Kyushu. The company can produce it cheaply on its land in Hokkaido. Manure can also be used as fertilizer for pastures. That cuts disposal costs.

Two months on, Breeders say that the cattle had no problems with their first winter in Hokkaido.

"Things went smoothly and we'll start the mating process in about 3 months. It's a real relief," Yamasaki says.

The company plans to transfer a total of 600 head of cattle before the end of the year. It hopes the new farm will become a major breeding site for wagyu cattle.

"I think it's a step forward. We'll keep going and look at whether to expand our capacity," Yamasaki says.

Another company in Hokkaido wants to increase the number of wagyu calves by taking advantage of the area's dairy industry.

The company has 1,700 Holstein milk cows. It's a major milk producer.

Wagyu calves are being born to Holstein cows there almost daily.

"The cows are pregnant with beef calves. We can do it by transplanting the fertilized egg of a wagyu calf into a Holstein mother," says Kaiji Ito of Nobels Dairy Farm.

Holstein mothers give birth to Holstein calves. But by using the egg transplantation process, a Holstein cow can give birth to a wagyu calf, which will eventually become prized wagyu beef.

The calves will be sold when they're about 9 months old. They'll be raised in other places in Japan for nearly 2 years and then put on the market.

The farm expects to produce about 900 wagyu calves born from egg transplants this year. In 4 years, the company hopes the number will rise to 3,000.

"We're determined to find a way to really cut our costs. We're hoping to show that we can create a sustainable production base of wagyu cattle," Yuichiro Enyo, president and CEO of Nobels Food.

Japanese wagyu beef has long been popular around the world. It even attracts tourists to the country who come just to enjoy it on home turf.

Let's see if the new breeding methods help wagyu hold on to its special status.